Fairchild At Center Of a Storm

By Rudolph A. Pyatt JrSeptember 2, 1983

Once again, Fairchild Industries has displayed an uncanny knack for putting itself at the center of controversy.

Regardless of the economic factors that led to the company's announcement Monday that it will close its Hagerstown aircraft plant, Fairchild's management has left an impression that it is either callous or incapable of managing a crisis, or both.

The timing of Fairchild's announcement that it will close the facility certainly raises questions about the company's motives as well as its employe and public relations programs. Indeed, the handling of that announcement and events leading to it run contrary to a boast that Fairchild made earlier this year at the height of a dispute with Maryland officials over that state's regulatory posture.

"Our record reflects responsibility--to our employes, neighbors and customers . . . ," Fairchild said in a position paper that was circulated to corporate executives in Maryland several weeks ago.

Nonetheless, both the state of Maryland and Fairchild's employes in Hagerstown have suffered serious setbacks in recent months as a result of decisions made by the company, the latest being to shut down the Hagerstown plant.

In early June, Fairchild spurned Maryland's efforts to get the company to keep its corporate headquarters in the state, and signed an agreement to relocate at Dulles International Airport in Northern Virginia. Fairchild announced its relocation plans after the company was found guilty of polluting the groundwater at its Hagerstown plant.

Fairchild denied that the pollution charges had any connection with its decision to move, and Maryland officials accepted it as a business decision.

To be sure, Maryland officials also view the closing of the plant at Hagerstown as a business decision, agreeing with the company that the primary factor in this instance is the slow economic recovery.

Obviously, Fairchild officials, like their counterparts in many other companies, had counted heavily on a quicker turnaround in the economy.

The Boeing Co., for example, had anticipated brisk sales of its new 757 commercial jetliner. But commercial carriers, still feeling the effects of the recession, have not rushed to order the plane, and Boeing was forced to stretch out delivery schedules for subcontractors.

When Boeing and Fairchild couldn't agree on further schedule changes, Boeing recalled the $308 million contract, stripping Fairchild of its mainstay production program at Hagerstown.

Fairchild officials presented a persuasive argument Monday that, without the Boeing subcontract, the Hagerstown plant would be drastically underutilized and too costly to operate.

Even with the Boeing subcontract intact, the facility operated at only 60 percent of capacity. In the meantime, Fairchild is close to winding down work on production of the A10 military aircraft.

Hence, Fairchild was "forced to bite the bullet" and close down the plant, an official explained.

But Fairchild must have known that the 757 contract was in jeopardy. A Fairchild Republic official acknowledged that attempts to renegotiate the Boeing subcontract had begun two months before Fairchild decided to close the Hagerstown plant.

What's more, Fairchild had agreed to eight previous Boeing schedule changes, and by the sixth or seventh, the handwriting was on the wall.

At the same time, it should have been clear to Fairchild early on that it needed to move expeditiously to secure another contract to fill the void that would be left by the A10 phaseout. Instead, the company relied too heavily on a belief that the Air Force would place more orders and that foreign sales would come pouring in.

Three years ago, Eliot Fried, an analyst at Shearson/American Express, declared the A10 dead but Fairchild disagreed. "It's my judgment that foreign military sales today are centered around fast, sleek fighters and not the A10," Fried said yesterday.

Despite increasing speculation that Fairchild might have to close the plant in the wake of recent developments, however, officials of the company announced on Aug. 16 that 400 employes would be laid off. The reason given then was the phasedown in the A10 program and an inability to line up foreign sales for the military aircraft.

If that earlier announcement was designed to prepare the Hagerstown community, it failed to cushion the next blow.

Two weeks later, Fairchild dropped another bombshell on Hagerstown with its announcement that the plant would be closed.

If there is any consolation for the 1,000 employes who will be laid off, Fairchild has promised to help them find jobs. It owes workers that much, at least, and could ill-afford to offer less.